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Stock Management - Coggle Diagram
Stock Management
what is the EOQ?
formula used to determine how much inventory we need to order by balancing holding & ordering costs
EOQ = SQR of (2 x demand x Order costs)/holding costs
EOQ finds optimum balance between order costs and holding costs
Lead time
time it takes to wait for new stock
safety stock
amount of stock enough for us to not run out of stock while we wait for new stock
Why do we have stock management?
Determine how much it costs to hold inventory
determine how much it costs to order inventory
to determine how much inventory we need to have by saving costs
which costs are relevant?
holding costs
costs incurred to hold inventory
ordering costs
costs incurred to order inventory
irrelevant costs
Fixed costs - costs not affected by how much inventory you order